NGOs: The credibility conundrumMumbai | Last Modified: Thu, Jul 30 2015. 07 44 PM IST
To accomplish their 2% CSR spending, many companies may need to partner with non-profits. But since few NGOs have accreditation, organizations are finding it difficult to partner with them
The rules for corporate social responsibility (CSR), under the Companies Act, 2013, which came into force on 1 April 2014, clearly state that companies have three channels to implement their CSR projects: foundations, in-house CSR teams or partnering with non-profits.
Credited with formulation of the 2014 CSR rules, Bhasker Chatterjee, director general, Indian Institute of Corporate Affairs (IICA), an autonomous institute under the corporate affairs ministry, is a strong proponent of partnership between companies and non-profits for CSR-related spending.
According to him, while company foundations have their place in channelling CSR funds, implementation of CSR activities is not possible without engaging with non-profits.
"Many a time, companies are city-centric and so are their foundations; to have a real impact, they need to go to the grassroots level and they can only do so if they engage with non-profits," he said.
This view is echoed by many in the sector. "CSR rules emphasise that the subjectivity of non-profits with domain knowledge and grassroots reach must marry the objectivity of professional corporates to have the best impact on the ground," said Sudhir Singh, leader-CSR (compliance), PwC India.
But forging such partnerships has not been easy.
Two factors stand in the way: many companies feel the credibility of non-profits is suspect and most would rather establish their own foundations than work with non-profits.
For instance, Kolkata-based HR consultancy, Genius Consultants, would much rather conduct its CSR initiatives through its own foundation, Grow Genius Foundation. The company provides financial aid to under-privileged children studying in classes III to X as part of its CSR spend. It aims to disburse Rs.18 lakh through the foundation in 2015-16, this is the first year for them as the foundation was only established in March.
"We felt we were capable of implementing our own CSR initiatives and want such initiatives to have the maximum impact. If we give money to some other organization, it will be difficult to ensure impact and optimal use of this money," said founder-director R.P. Yadav. He added that the due diligence required can best be achieved if the company implements its own initiatives.
Maruti Suzuki, on the other hand, is moving towards a mix of in-house initiatives and tie-ups with non-profits. Right now, it conducts close to 80% of its CSR initiatives in-house with a team of 40 people. "We prefer to do CSR activities in-house as we have a better monitoring of money spent and targets achieved," explained Ranjit Singh, the company's CSR head. "However, under the new CSR rules, we are venturing into sectors that Maruti does not have domain knowledge in (and hence the need to engage non-profits)," he added.
For instance, under skill development, Maruti has adopted 29 state-run technical training institutes as part of an in-house initiative, but for campaigns like building toilets, it is working in partnership with non-governmental organizations (NGOs) like Sulabh International. "We only work with NGOs after thorough background checks and verification," Singh said
Sulabh has constructed 100 toilets for Maruti in 2014-15 and has been tasked with constructing 700 more in 2015-16. In 2014-15, Maruti spent Rs.37.25 crore on CSR, which was 1.48% of its profits. This figure was also a 60% jump from the spend in 2013-14.
The CSR rules say that companies with a turnover of Rs.1,000 crores or more, or with net worth of Rs.500 crore or more and companies with net profit of Rs.5 crore or more need to spend at least 2% of the average net profit of the preceding three years on social activities defined in the rule under schedule VII.
While large companies like Maruti rely on internal processes to perform background checks on the NGOs it chooses to work with, smaller organizations find this tough.
That is because there is no centralized, credible vetting process in place for NGOs, though there are several ongoing initiatives to provide accreditation to NGOs.
IICA currently lists 79 NGOs on its website as credible organizations. The list includes organizations such as Abled Disabled All People Together (ADAPT, formerly Spastics Society of India) in Maharashtra, Administrative Staff College of India (ASCI) in Andhra Pradesh and Bhagwan Mahaveer Vikalang Sahitya Samiti in Rajasthan.
However, the list comes with a disclaimer that "IICA is not responsible" for the way any organization might behave after a company starts working with them. This declaration has been put in place "to avoid legal liability to the institute in case of any wrongdoing by the NGOs", Chatterjee explained.
All 79 organizations listed on the website are said to have undergone a rigorous process of checks and received approval from as many as seven government agencies and ministries. These NGOs submitted copies of their legal and financial documents and IICA took 90-120 days to process and cross-check the submissions and then upload the details of the organizations on its website.
This approval is valid for three years. The data-base was uploaded three months ago and the institute said it is going to expand this database exponentially in the coming months.
Industry associations like the Confederation of Indian Industry (CII) have also started work on an NGO database. In collaboration with Bombay Stock Exchange and IICA, CII launched the Sammaan portal in April, which will facilitate companies partnering with NGOs, whose credentials have been verified, to track their funds.
Five years ago, some NGOs came forward with mechanisms to establish their authenticity. One such initiative was the Credibility Alliance, a Delhi-based organization which claimed to have verified addresses and financial records of 700 such organizations. This is still a very small number, considering that the country has an estimated 1-2 million such organizations.
Another platform purportedly listing 'credible' NGOs is HelpYourNGO-an initiative started in 2002, which provides detailed financial records of non-profits to help donors pick and chose their organizations.
Pradeep Mahtani, CEO, HelpYourNGO, said, "You need to bring transparency to NGOs and just putting out the numbers is not enough. That is why we have attempted to create categories and sub-categories, which can easily be used and cross-referenced by people using our site."
HelpYourNGO has seen its database expand from 200 registered organizations in 2013 to 575 in 2015.
A third source of 'credible' NGO data is GuideStar India. Established in 2008, this site gives ratings to organizations based on their transparency, accountability and work on the ground. "Initially, we were only listing organizations based on their legal and financial compliance," said CEO and founder Pushpa Aman Singh.
This website lists 5,200 NGOs. "Though our primary source of information is the NGOs themselves, beginning February this year, we have started doing physical verification and looking at transparency and accountability of organizations along with their financial and legal compliances," she explained.
Some consultants are also helping companies find credible partners for their CSR initiatives. Adarsh Kataruka, director, Soul ACE, a pan-India consultancy firm, offers such a service to his clients but this information is not in the public domain. He said the company has a list of close to 5,000 non-profits, which have been cross-checked by Soul ACE.
"So, if a company is interested in spending CSR funds in a particular sector such as women’s empowerment, the Soul ACE team identifies the best in the sector and conducts background checks and cross-references before suggesting names (of partners) to the company," Kataruka explained.
"Since CSR initiatives are still developing and the programmes are not set in stone, such accrediting initiatives may actually help in the long run," Sudhir Singh of PwC India said.
But verification of paperwork submitted by NGOs is not enough.
The accreditation process must verify governance within the non-profit, capacity of the organization, legal standing, financial records as well as impact on the ground, he added.
By Moyna Manku
Called Sammaan, the exchange will bring together NGOs and firms willing to spend on philanthropy
Within a fortnight, the BSE will launch a new exchange that will help listed companies meet their social impact spending requirements. Called Sammaan, the platform has been designed as an intermediary between corporates willing to spend on philanthropy and cash-starved non-government organisations.
The non-profit exchange assumes significance in the backdrop of the amended Companies Act of 2013 that mandates that every company with a net worth of ₹500 crore or a turnover of ₹1,000 crore or net profit of ₹5 crore should spend at least two per cent of its three-year annual average net profit on corporate social responsibility (CSR) initiatives. Of the 4,000-odd companies listed on the BSE, 1,294 have to comply with this rule.
Sammaan will launch with about a thousand projects listed by NGOs across the country, which deal with subjects ranging from education, art and culture, and sports to sanitation, women's empowerment and environment sustainability. While NGOs can list their projects on Sammaan for free, their work first needs to be green-lighted by six central ministries. They will also have to disclose twice a year how they spent the funds raised through the exchange. In the first few years, Sammaan will enlist agencies such as Dasra, HelpYourNGO, Credibility Alliance and GiveIndia to audit the projects. The Institute of Chartered Accountants of India has also agreed to sign off on CSR spending made through Sammaan.
"The new exchange will be a simple way for them, and for countless other unlisted companies, to comply with the CSR rules," said Praveen Chakravarty, Independent Strategic Advisor to BSE, who negotiated BSE's memorandum of understanding with industry body CII and the Indian Institute of Corporate Affairs (part of the Ministry of Corporate Affairs) that led to Sammaan.
Eventually, based on Sammaan's success, the BSE may even consider launching an index of companies making ethical investments, along the lines of FTSE4Good Index Series, Chakravarty said.
The CSR rules became applicable in FY15 and sources say not many companies have even made the mandatory disclosures, let alone spend on CSR.
Chakravarty believes companies still have a glimmer of hope that the rules will just go away. "But the then Corporate Affairs Minister Sachin Pilot," he says, "intended the rule as a nudge, not a tax. The compulsory disclosures are meant to shame companies into giving." It's a tried-and-tested mechanism, Chakravarty explains. "Even the Rockefellers and Carnegies had to be shamed into giving."
FOR IMMEDIATE RELEASEMumbai | 3rd March 2015
HelpYourNGO.com India Pvt Ltd is proud to announce its partnership with Equitymaster Agora Research Private Limited.
Equitymaster was launched in 1996 as India’s first financial website and an independent equity research initiative based out of Mumbai, India. The company brought its principles of rigorous, data-driven and unbiased research to help common investors make informed decisions in the financial markets.
www.HelpYourNGO.com was similarly set up to increase transparency in the NGO sector by providing an online interface between donors and NGOs. The standardized financials, in-depth insights and comparison tools on the website are designed to help donors and subscribers cut through the noise surrounding the NGO sector and support NGOs based on their performance.
Now, Equitymaster will be supporting HelpYourNGO in its mission to increase transparency in the NGO sector by acting as their title sponsor. The sponsorship support will help HelpYourNGO increase its reach, both online and offline, broaden its subscriber base, and offer more services.
Pradeep Mahtani, CEO of HelpYourNGO.com said, “We are pleased to get this support from Equitymaster, which is highly regarded by investors. This association will help us get greater recognition and visibility.”
Rahul Goel, CEO Equitymaster, added, “We are delighted to join HelpYourNGO in their goal of bringing transparency and integrity to the NGO sector. I am confident that this alliance will help Equitymaster readers make a more informed decision the next time they are planning to donate to an NGO as well.”
For more information contact sunishi@HelpYourNGO.com, HelpYourNGO Foundation.
#16, Jolly Maker Chambers #II 225, Nariman Point, Mumbai – 400 021 Phone: 022 – 2204 1250/51
How good is your favourite NGO?
By Saurabh Datar, Mid-Day | Feb 02, 2014
Help Your NGO is a website that helps you evaluate and analyse an NGO and make an informed decision before you donate your money to a cause
Often, one is solicited by NGOs for donation with colourful brochures and lengthy programme lists. Most may even present their financial details for you to glance over. Impressed by the presentation, you choose to donate to the cause. But how effectively and how well is your money really being used?
Help Your NGO (www.helpyourngo.com) has the answer to your question. This south Mumbai-based organisation lets you compare financial parametres and NGO data, and helps you make an informed decision.
“Our company’s goal is to bring in more transparency in the social sector. With this, donors feel more comfortable in giving money to charities,” says Pradeep Mahtani, the CEO of Help Your NGO (HYN).
Mahtani feels that even though NGOs tend to reveal their annual balance sheets, they are very difficult to understand. The aim of the website is to bring out the numbers in a simpler format for donors.
To give an example, say, you wish to compare NGOs that work towards child welfare. The website will help you compare various parametres — how much each charity has spent on their programmes, what percentage of the total donations received were funnelled into direct programmes, what fraction went into overhead expenses, what sources do the donations come from, et al.
Depending on these heads, one has a better idea of which organisation has been more effective in realising their goals. Also, if you wish to donate to an NGO that has spent the most on cancer programmes in the year, or one that has the least funding, the website will throw up the required data.
Equity research analysts Ajit Dayal, IV Subramaniam and Rahul Goel founded Help Your NGO in 2000 and then it went defunct for a while. Later, in January 2013, Mahtani was brought in to revive the firm. “We bring in our equity research knowledge to the social space,” he says.
Currently, there are 250 NGOs listed on the website. Each one receives a donation of R1,000 from HYN on being included. “We ask NGOs for their annual reports of the past four years, their 12A certifications, 80G and SCRA certifications, registration certifications etc,” says Mahtani.
Sometimes, NGOs object or want some changes. The team looks into the request and if found genuine, the necessary changes are made.
“We also have analysis to help donors understand the NGO’s performance better,” adds Mahtani. Fifty NGOs have been analysed by HYN’s team. For the analysis, the team meets up with the organisation and makes them answer detailed questions, which go beyond the information provided by the documentation. The resultant reports provide insights into the positioning and functioning of the organisation and projects a clearer picture of how the organisation has been doing.
The results have been encouraging — some NGOs have had several sizeable donations after being listed on the website. Smaller organisations, especially, have benefitted better, since they’re given a platform on which people can compare their work with their relatively bigger counterparts.
Interestingly, HYN also has a ‘Special Occasion’ page. “Suppose you’re getting married and you don’t want gifts.
Instead, you want guests to contribute to an NGO. We will create a page for you. Once you put the URL on the invite, guests can donate on your behalf,” explains Mahtani, who says a lot of young couples have opted to do so.
Currently, the venture is being financed by Dayal. “We’re also looking for funding,” Mahtani reveals. The company plans to add more analysts, as the task ahead is massive. There are almost R3-10 lakh NGOs in the country (more being added by the day), and HYN is rapidly increasing its database. That’s good news for us — the more to choose from, the better it is.
Log on to www.helpyourngo.com for more information
Our founder, Ajit Dayal had a chat with Radio Jockey Hrishikay on Radio-One on 19th March 2014. Hear Ajit Dayal views on philanthropy, transparency and the path he has followed.
Its a good programme and it will help many NGOs which are working at Grassroot level.
Congratulations for all efforts in listing out the NGOs. You have been doing a great job.